Monday, June 06, 2011

On the Illegal and Monopolistic PLDT-Digitel MergerPrivilege Speech delivered before the House of Representativesby Bayan Muna Rep. Teddy A. CasinoJune 6, 2011

Mr. Speaker, dear colleagues.

I rise on a matter of personal and collective privilege to protect the integrity of the House and help prevent the re-emergence of a monopoly in the telecommunications industry.

Around two months ago, telecommunications giant PLDT, which owns mobile phone leader SMART Communications, managed to buy into and gain control of Digital Telecommunications Inc., which in turn owns Sun Cellular, the third biggest mobile service provider. The merger created major tremors in the industry, the business community and mobile phone consumers.

In fact, Mr. Speaker, dear colleagues, this abhorrence of monopolies is enshrined in the Constitution. Section 19, Art. XII of the 1987 Constitution states: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

In the mid 1990s, the telecommunications industry was de-monopolized and telecommunications franchises granted to several companies with a built-in safeguard against any unintended reconsolidation of the industry. Among the said franchises was the one of Digitel, Republic Act 7678, which under Sec. 15 stated that Digitel “…shall not lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other corporation or entity without the prior approval of the Congress of the Philippines. Neither shall the controlling interest of the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity without the prior approval of the Congress of the Philippines.”

Essentially the same provisions can be found in the franchises of PLDT, RA 7082 renewed in 1991, Globe Telecom RA 7229 granted in 1992, and Smart Communications RA 7294 also in 1992. This provision was also reiterated in the franchise granted by Congress in 2002 to Digitel Mobile Philippines, Inc., which owns Sun Cellular. Under the said franchises, Digitel, PLDT and Globe – the top three telecommunications companies – are required to get congressional approval before any lease, transfer, grant of usufruct, sale, and transfer of rights and privileges of their franchise.

Precisely, Mr. Speaker, this is what happened in the PLDT-Digitel merger. Kinain ng PLDT-Smart ang Digitel-Sun Cellular. The merger now controls 71% of the market. What is wrong with this?

First thing’s first. The merger is illegal because such a buyout or swap and share deal, whatever you call it, requires congressional approval. This is explicit in Digitel’s and Digitel Mobile’s franchises. Proponents of the merger say congressional approval of such mergers and acquisitions have already been waived by virtue of the 1995 Public Telecommunications Policy Act (RA 7925), which ensures equality of treatment for franchise holders. The argument is that since the requirement for congressional approval of such mergers among telecom franchise holders have already been removed in two other franchises, that of RCPI and Sear, then under the principle of equal protection, the same should be waived for the merger involving PLDT-Smart and Digitel-Sun.

But, Mr. Speaker. I don’t think the framers of RA 7925 or other franchises that waived congressional approval ever imagined a situation where PLDT or any entity would once again control 71% of the market. Ang iniisip siguro ng Kongreso noon, kainan ng maliliit na isda, hindi ng mga dambuhala. A deal that would reverse the policy of demonopolization in the telecommunications industry was certainly not contemplated by previous Congresses and should not be tolerated by the 15th Congress. The fact is, congressional approval is explicitly required in the franchises of Digitel, Digitel Mobile, PLDT, Smart Communications and Globe Telecom.

Second, not only is the deal illegal, it will foster a monopoly in the sector and all the ills that come with overwhelming market power. Ngayon pa lang nga, hindi na magawang matino ng PLDT-Smart ang kanilang serbisyo, bibigyan pa natin ng dagdag na negosyo? We are all victims of dropped calls, spam texts, questionable billings, unreliable and slow internet connections from the major players. Shouldn’t they improve their services first before gobbling up the competition?

Let’s be honest for a minute. What will stop PLDT from discontinuing or even disrupting Sun Cellular’s unlimited text and call plans? And with Sun out of the way, what will stop PLDT-owned Smart Communications from conniving with Globe Telecom in raising rates the way they always wanted it to happen?

Unfortunately, the body that is supposed to regulate monopoly practices in the industry, the National Telecommunications Commission (NTC), cannot be expected to protect the consumer or national interest. Our experience with the NTC is that it is afraid of the giant telcos. Sa halip na pangalagaan ang interest ng publiko, inuuna pa nito ang interes ng malalaking kumpanya sa telekomunikasyon.

I have yet to recall of an instance when the NTC exercised its regulatory powers to rein in the profiteering and abusive practices of the telcos. Palagi hong pinagbibigyan ang telco - pinapalusot ang lousy services at hinahayaan ang mataas na singil - on the pressumption that there is healthy competition.

There are persistent rumors that our NTC commissioners are on the payroll of the telcos. In this light, maybe its about time that we conduct lifestyle checks on the NTC commissioners.